Environmental Risk Management Difference Between Risk Management and Risk Assessment

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a. Environmental Risk Management

Environmental management is a mixture of science, policy, and socio economic applications. It focuses on the solution of the practical problems that humans encounter in cohabitation with nature, exploitation of resources, and production of waste McGraw-Hill, P.831. Investors and companies have become more and more conscious of the many ways that environmental issues affect their businesses, presenting not only challenges but also opportunities. Environmental issues generate business risks that have to be carefully handled. Regulations related to businesses and the environment constantly improve and almost often create uncertainties for companies bringing significant implications for their financial performance. Consumer‘s reactions and other environmentally motivated actions create serious non-regulatory r isks that may reduce a company‘s markets or affects its financial strengthFall, 2001. Case 1999 stated that many business leaders realized that environment factors can lead to economic growth around the world and agrees that environmental management can improve the bottom line performance of the company. Cost savings have been identified through:  Reduce the usage of raw materials through more efficient production techniques  Reuse or recycle wastes  Reducing the amount of energy used, such as gas and electricity  Cutting water consumptions  Lowering air emissions 11

b. Difference Between Risk Management and Risk Assessment

According to the Environmental Protection Agency, a risk assessment is ―the evaluation of scientific information on the hazardous properties of environmental agents, the dose- response relationship, and the extent of human exposure to those agents‖ EPA Glossary of IRIS Terms. Once risk has been assessed and characterized, ―political, social, economic and engineering implications together with risk- related information‖ are gathered ―in order to develop, analyze and compare management options and select the appropriate managerial response to a potential chronic health hazard‖ EPA Glossary of IRIS Terms. This process is called risk management. Together these steps comprise the scientific approach to risk Stern, 2007. According to Pritchard 2012, risk assessment is defined as risk estimation and risk evaluation or can be said as risk analysis, while risk management is the process of implementing decisions on managing risks. Risk management involves identifying, analyzing, and taking steps to reduce or eliminate the loss faced by an organization or individual.

4. Definition of Cost of Capital